The number one topic for financial markets seems to be bond yields in both the Eurozone and the United States. Currently, in the US, investors are pondering Operation Twist, while there are ambiguous statements from the ECB.
As a result, the EUR/USD remains above the $1.2000 level, and on Tuesday it hit near its lowest level in a month in an attempt to overcome $1.2000. Investors seem to have scrutinized the statements of several European Central Bank policymakers and the release of mixed economic data. ECB board member Fabio Panetta said the central bank should expand its bond purchases or increase the amount allocated if necessary to keep yields low. President Christine Lagarde said Monday that monetary authorities will help ensure businesses and families have access to the financing they need to get through this difficult period. She added that they can do so with confidence that financing conditions will not be tightened prematurely. Economic data showed that February's PMI survey indicated that private sector activity in the eurozone contracted less than initially thought, while German retail sales fell in January for the second month in a row and unemployment in Germany and Spain rose in February amid ongoing restrictions.
Today, Bloomberg reported that ECB policy makers see no need to take drastic action to combat rising bond yields, believing that risks to the economy are manageable through verbal interventions and the flexibility of the bond-buying program. The European Central Bank is therefore trying to tone down earlier, more forceful statements, including those about the possibility of cutting interest rates.
In the cryptocurrency market, we may observe more decisive increases. The price of BTC expressed in USD has already exceeded the level of USD 51 thousand, and the scale of bitcoin outflows from cryptocurrency exchanges since the beginning of the week has already amounted to almost 30 thousand BTC - according to data from the CryptoQuant service. There is also speculation that Twitter or Netflix will be the next companies to enter bitcoin. Consideration is also underway as to whether BTC could emerge as a complement to the funds' portfolio strategy, which could model 60 percent stocks and 40 percent bonds. If there were 1-5 percent room for bitcoin in that strategy, that too could lead to sustained real demand.
The U.S. Securities and Exchange Commission (SEC) has received an application from the CBOE exchange to list the first U.S. ETF for bitcoin. Under standard procedure, the Commission has 45 days to review the application and respond. If there is an extension, the Commission may have 240 days to express its position. However, at the beginning of the year, the chairman of the Commission changed, who is definitely more enthusiastic about blockchain technology, so perhaps we will see the first US ETF on BTC as early as this spring.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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